Congress Enacts Expanded NOL Carrybacks
The Worker, Homeownership, and Business Assistance Act of 2009 (“Worker Act”) allows taxpayers to
elect to carry back NOLs incurred in tax years ending after December 31, 2007 and beginning before
January 1, 2010 (or, for calendar year taxpayers, 2008 or 2009) for either 3, 4 or 5 years. For other
years, NOLs can generally be carried back only 2 years. Two limitations apply:

The amount of any NOL that can be carried back to the 5th year is limited to 50% of the
taxpayer’s taxable income for the 5th year;

Taxpayers that received TARP funds or are affiliated to a TARP recipient are not eligible for the
expanded 3, 4 or 5 year carryback.
Electing taxpayers can elect to carryback NOLs for only one taxable year. For example, calendar year
taxpayers can elect the carryback for either 2008 or 2009, but not both years (with an exception for
“eligible small business corporations which will be discussed below). The election must be made by the
due date (including extensions) for the income tax return for the taxpayer’s last year beginning in 2009.
In other words, a calendar year taxpayer has until October 15, 2010, to make the new election for either
the 2008 or the 2009 tax year.
Pursuant to IRS Rev. Proc. 2009-52, the election to carry back 2008 or 2009 NOLs is made by attaching a
statement to the taxpayer’s original or amended tax return for the year the taxpayer is making the
election. For example, a calendar year taxpayer would attached the statement to its 2008 federal
income tax return (or its amended return if the 2008 return has already been filed) if it makes the
election for 2008 and would attach the statement to its 2009 federal income tax return if it makes the
election for 2009. The statement must include the following information:

A statement that the taxpayer is electing the extended carryback period under Rev. Proc. 200952;

A statement that the taxpayer is not a TARP recipient and is not affiliated with a TARP affiliate;

Specify the length of the carryback period being elected, i.e, either 3, 4 or 5 years
Under the American Recovery and Reinvestment Act of 2009 (“ARRA”), “electing small businesses” were
permitted to elect an extended carryback period of 3, 4 or 5 years for any tax year ending in 2008. A
carryback to the 5th year under this election was not subject to the 50% of taxable income limitation. If
the eligible small business made an election to carry back its 2008 NOLs under AARA, it can nevertheless
make an election to carry back its 2009 NOLs under the Worker Act. If the eligible small business failed
to make an election to carry back 2008 NOLs under AARA, it is limited to the carryback for either 2008 or
2009, but not both, under the Worker Act. An “eligible small business” is a corporation, partnership, or
sole proprietorship with gross receipts of less than $15 million in the loss year or with average gross
receipts of less than $15 million over the three-year period ending with the loss year.
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